Apple and the Loss of a CEO: The Three Phases

As I'm watching the folks who really know Apple best claim that the firm will remain the same once Steve is gone, despite massive evidence to the contrary, I'm reminded of the three similar phases when folks learn of a death. They are shock and denial, turmoil and disorganization, and recovery. Like an individual, a company has to get to the recovery part. Windows Phone Mango and Windows 8 may mean that Microsoft is finally getting to recovery as we seemed to have had an extended period of turmoil and disorganization with them after Gates left.

Let's use Apple to explore the three phases a firm goes through when losing a founder with special focus on the two you want to avoid.

Apple and Jobs: Undeniably Intertwined

There are a lot of ways to argue this, but it's best to start with a quote from Larry Ellison who is one of Steve's closest friends and also an ex-member of Apple's board: "The Mac is the expression of his creativity, and Apple as a whole is an expression of Steve." To those who are closest to Steve, the sense I get is that it is hard to see where Steve, the person, left off and Steve the CEO began. This was no day job. Steve is a micro-manager. If you read one of the in-depth biographies or even one of the short summaries, one thing is clear: The two are intertwined uniquely. For instance, Steve is actually customer testing at Apple. He doesn't do panels; he personally tests each product. I actually think more consumer-product CEOs should do this and think that one of the reasons IBM had to get out of the consumer-PC business and Microsoft has had so many screw-ups is that Gerstner and Ballmer didn't want to.

But he touches every major decision he knows about and many minor ones. He wanders through the company firing folks who don't meet his standards (there are folks in Apple he has fired three or more times). He is a lot of things, many not so good, but what he isn't is a regular professional CEO. Apple was his life and he wouldn't have stepped away from the CEO Job if there was any chance he could do it. In fact, I think he partially pushed for Cook because he secretly thinks that, if he does get better, he can still come back and replace him.

Ballmer Is No Gates and Cook Is No Jobs

Cook, like Ballmer, is more of an Ops guy and not a visionary. And that means that, despite what most are saying, most also know that Apple has to change and it will likely start to change for the worse in about 12 months unless there are some major structural changes made now to either backfill Jobs or to redesign the company so it can operate without him. Microsoft tried to create a visionary who was subordinate to the Ops guy (Ray Ozzie) and that didn't work. The captain can't report to the navigator no matter how good the navigator is.

Microsoft didn't fail but it stalled and fell far from the top spot and eventually was actually passed by Apple. That future is what Apple is looking at. But that isn't my point here. My point and warning is that this pretty much happens every time an engaged founder CEO leaves his/her company. This is because the company typically came up around them and no one has any idea how to really separate the two.

Denial

This is the phase that Apple is in. Even though Jobs personally visits and touches an amazing number of people there, people who know both Apple and Jobs can't be separated are in denial that Jobs has left. They cover up the denial in a number of ways and actively resist seeing it. If you sit back and watch from a distance, you can see it happening. What you have to realize is that if you work for a company in a similar situation, the same will likely happen to you and you'll probably either not address the related problems in a timely manner or not make timely career choices as a result.

You wouldn't want to go to work for a company entering this phase or stick with it if you had the choice (particularly if you are getting options as a major part of your compensation). This is because the firm hasn't bottomed yet and the next phase will get ugly.

Turmoil and Disorganization

Remember the Scully years at Apple or the last half of the last decade at Microsoft? Reorganizations, executive firings, product eliminations are all very likely during this phase. The drop of the TouchPad and announcement without plan of separating the PC division from HP looks like HP may have dropped into this phase. From outside it looks scary, and from inside it can be frightening as there is no job security and there is a deep feeling that the firm is out of control. I was at Disney during this phase and I couldn't take it. As much as I loved working for the company, I just couldn't take the stress. You look around and folks are getting fired or laid off all around you as management tries to appease the financial analysts and figure out which end is up.

Recovery

Now, companies tend to be more fun to work for in this phase. Suddenly management has a clue, numbers start to come up, executive teams are formed that function and the structure of the new company is formed. Michael Dell had to come back to force the company into this phase and Dell is largely recovered today and people rave about working there again more often now. It can almost feel like working for a successful startup because people are closer largely because the friendships were forged in the firings that proceeded this phase. But, let's be clear, the company that is in this phase is very different from the company that lost its iconic CEO.

Wrapping Up

My point in this piece isn't to talk about the future of Apple, particularly with Apple in denial, or to go around pointing out that this problem is near suicidal (and I've been doing too much of it already). My point is that the pain associated with this transition can be mitigated if you understand that it is common for companies, which are made up of people, to go through a process that seems very similar to any human loss. If you know this, you can avoid the painful parts, either as an executive by pushing through them, or as an employee by changing jobs or making different job choices.

Just watch Apple closely. If it follows the patterns that companies like Dell, Microsoft and Disney followed, you'll see all three phases and likely see my point that two of the phases you'll want to avoid.

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